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Errors in the World of Accounts Payable

By: Matthew Clark, Corcentric Consultant

Errors occur far too often when it comes to accounts payable invoices. One of the dirty little secrets in the business world, rarely acknowledged, is the fact that vendors send out invoices that are laden with inaccuracies, and we all know that mistakes made by the vendor rarely benefit the customer. The entire blame for errors in the world of accounts payable cannot solely be attributed to vendors. Mistakes are made everyday in processing invoices that come from the vendor 100% correct. Combine the number of mistakes being made by the vendor with the number of mistakes being made by those processing the invoices and you have a serious problem. As a result, a tremendous amount of additional work is being done to identify and resolve mistakes.

The Institute of Management and Administration recently conducted a study about error rates, and the numbers are alarming. Keep in mind the numbers reported below understate the problem because only known errors can be reported, and people tend to underreport numbers that reflect negatively

Vendor Error Rates:

75.6% of respondents reported vendor error rates of at least 1.0%
33.2% of respondents reported vendor error rates of at least 3.0%
14.2% of respondents reported vendor error rates of at least 5.0%
(Source: IOMA)

Invoice and Payment Processing Error Rates:

59.5% of respondents reported processing error rates of at least 1.0%
11.1% of respondents reported processing error rates of at least 3.0%
2.8% of respondents reported processing error rates of at least 5.0%
(Source: IOMA)

If you combine the vendor error rates with the invoice/payment processing error rates the result is astoundingly high combined error rates. One can’t help but wonder how many thousands of dollars companies lose each year in duplicate payments and dispute resolution. The next logical question is what to do to minimize the amount of time and money that is lost in dealing with errors.

The best way to eliminate errors is to eliminate as many manual processes as possible. More manual processes mean more opportunity for error. Electronic invoicing solutions that include some form of electronic workflow help to greatly reduce the occurrence of errors. In addition, when errors do take place they are resolved quicker with online dispute processes. Most important, electronic workflow solutions have immediate error detection mechanisms in place. These precautions make sure that mistakes do not end up in the suppliers’ bank account.

While no company should reasonably expect to completely eliminate errors, all should take steps to see that errors are minimized. Not only do excess payments squeeze company profits, they add overhead to the cost of doing business as time is wasted identifying the problems-and then fixing them. By accepting the status quo, businesses are accepting the practice of wasting money.

If you would like Corcentric to help you minimize the time and money your company spends dealing with errors please click here to contact Corcentric.